How to Calculate the Intrinsic Value of a Stock like Benjamin Graham! (Step by Step)

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In this video, I take you step by step on how to calculate the intrinsic value of a stock using the formula created by Benjamin Graham and made popular by the book, "The Intelligent Investor." This formula has been used by many famous investors, including Warren Buffett.
*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video:
How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example)
• How to Apply a Margin ...
I am not a Financial advisor or licensed professional. Nothing I say or produce on KZbin, or anywhere else, should be considered as advice. All content is for educational purposes only. I am not responsible for any financial losses or gains. Invest and trade at your own risk.
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#IntrinsicValue #BenjaminGraham #StockValuation

[@Dividendology]

*Important Update - I might a slight error on the margin of safety portion of this video. In order to see the correct way to apply a margin of safety, please watch this video: How to Apply a Margin of Safety like Benjamin Graham! (Margin of Safety Explained + Example) kzbin.info/www/bejne/eKrWeItpj8x_fLc

[@anilkhadka2092]

as you said, in revised scenario as well, acceptable buy price is less than intrinsic value but how cone its sell option?? or the formula should be current price < acceptable buy price???

[@kk28032]

@@anilkhadka2092 correct formula at 15:38 , look at the formula box....

[@dougb8207]

Oh thanks ... been spinning my wheels for half an hour trying to unwind what my discrepancy was! I was going to comment, but you've already found the problem.

[@SonnyBB]

the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75

[@metalsir7060]

This video is amazing! nice job! do you know if there is a way to manually calculate your own growth rate pulling the historical data into the sheet? many tks! PS: I made a concatenate function that actually gives the complete yahoofinance link straight into the analysis tab.. easy but effective since you click on the cell and the page magically opens in the right place. scroll down, boom, done.

[@MrNintoku]

11:03 I think this is an error since no matter what you have as your Intrinsic and Acceptable buy price as long as the margin of safety is below 100 it will always say Buy. I am assuming here that the comparison should be between current price and acceptable buy price. If Current Price

[@AlejandroDiaz-ll5eq]

this is what i was thinking too. at 13:22 the formula changes for "acceptable buy price" as well but i'm not sure if i'm missing something

[@firsargentum5920]

Yeah, you're right. He should be comparing the estimated intrinsic value to the actual current share price in F26. Also, in reality, you probably wouldn't wait to sell until the stock goes 65% above its intrinsic value. If you sell if it goes say 20% above intrinsic value then the condition should be something like: IF (F26 < F29, “Buy”, IF (F26>(F23*1.2), “Sell”)

[@toddforney5198]

I believe that's correct as well. I also noted that the "Difference" calculation is not used in the buy/sell determination. Perhaps it's just an interesting statistic.

[@brandyharding7692]

@@firsargentum5920 this is to decide rather to buy or not. Once you buy you shouldn’t be looking to sell if you have done your homework for that company.

[@firsargentum5920]

@@brandyharding7692 You can also use it as a guide to sell if you think the rationale for buying not longer holds, one of which could be that the stock has run up too much and has become overvalued. In any case, the substantive point is that the formula he gave for deciding on the Buy decision is wrong - I'm sure the OP understands the math and probably just effectively made a "typo" :)

[@larryyang976]

Great content! Based on this same formula, apple intrinsic value is only $142 as of 02.18.2023. Apparently the growth rate cannot catch up to the corporate bond rate and the eps stays same. Now I understand why these once hot stocks are not hot anymore during inflation. Great formula. Thanks for bringing this to me!

[@swapnilhirave3354]

Great content. Acceptable buy price must be greater than Current Price for decision on "Buy", as 'Acc. (10:20) Buy price' is factored from intrinsic value itself. Need to correct this in model 1.

[@davidoneill4859]

Very helpful, but the Buy/Sell formula should compare acceptable buy price to current price

[@tommybahamas40]

Very good video to understand the Intrinsic value of a stock and other important points to keep in mind before buy/ sell of stocks

[@dudemanbrotime-financetech1338]

Finally someone whos not speculating/gambling

[@jle92708]

Investing is speculating to an extent. The bet is to assume the market will realize the value.

[@lucasasselmeier7825]

@@jle92708 speculation Is a term used in investing to distinguish a value approach based on the analysis of a businesses financials. Speculation is reviewing the stock charge and betting that it will go I do agree that investing requires speculation, though taking a value approach and deeply analyzing a business is using realized data to make more accurate predictions. There are no guarantees of course, but there ways to invest that isn’t just placing a bet because you feel like you can make money

[@sheldor73]

@@jle92708 🤣🤣🤣🤣🤣

[@maalikserebryakov]

@@jle92708LOL

[@maalikserebryakov]

@@sheldor73 Whenever I want a good laugh I turn to the stock market community, there is always a large group of court jesters to lighten the mood :)

[@kegomania]

Warren Buffet doesn't use this. He uses a version of this that uses free cash flow. He doesn't like to use earnings because EPS can be manipulated by management.

[@FakeSparrow-lu5ih]

What is the formula or what is the name of it, pls let me know, thanks

[@kegomania]

@FakeSparrow-lu5ih unfortunately it's a well kept secret by anyone who has the formula. They're unique to the individual depending on the formula. I suggest really diving in and learning as much as you can about the topic. But on our levels, his quote "buy good companies and do nothing" works well.

[@kegomania]

@@FakeSparrow-lu5ih research "discounted free cash flow (DCF)"

[@FakeSparrow-lu5ih]

​@@kegomania thanks

[@canuk688]

probably worth stress testing that growth rate, tapering everything you can is worth seeing what the model implies as value

[@lio298]

Great Job!!!! Thank you and very good luck with your channel. Keep up with sharing good content

[@davidroussell5118]

Thank you for this. I've wanted to find a IV calculator for Graham for a while. I now officially have three different methods for calculations!🤣 1. Multiple of earnings 2. Discounted Cash Flow and now 3. Grahams. However, since I follow so much of Graham's teachings I think I'll explore this model.

[@Dividendology]

I’m glad this model helps! Don’t forget about the Dividend discount model as well!

[@philochristos]

When you use these different methods of calculating IV, do they give close to the same results, or are there big differences between them? If there are big differences between them, which method do you think has turned out to be more accurate?

[@brysonmoore7596]

Thank you for actually showing how to calculate it

[@zaiho1336]

This is a great video; thank you. However, I think there's an error calculating the Acceptable Buy Price using the Margin of Safety (MoS). If a 65% MoS for AAPL is 252.26 (388.09 x 65%), which means we want more protection; then the Acceptable Buy Price = Intrinsic Value - MoS of 65% = 135.83 (388.09 - 252.26 = 135.83). Let's say we would accept less MoS for AAPL, which means we are more confident about the company and accepting less protection. A 35% MoS is 135.83 (388.09 x 35%). So, the Acceptable Buy Price would be 252.26 (388.09 - 135.83 = 252.26). Therefore, a 35% MoS (low MoS) would result in a low Acceptable Buy Price (252.26), and a 65% MoS (high MoS) would result in a much, much lower Acceptable Buy Price (135.83). In contrast, the video shows that a 65% MoS has an Acceptable Buy Price of 252.26.

[@im_gauravg]

Absolutely agree. I think too that Buy Price = Intrinsic Value - (Margin of Safety * Intrinsic Value)

[@jennjenn1273]

Yes, the formula is off.

[@Chino99999]

You are right.

[@isasunasra9910]

Absolutely agree, thanks for pointing out

[@vladpruna95]

Thank you! I was wondering if I've made a mistake because it seemed off

[@BenzinioB]

The best explanation of Intrinsic Value of a Stock!

[@Dividendology]

Thank you!

[@SonnyBB]

the growth rate express in percentage should be computed as percentage, so the intrinsic value is only around 75

[@papijelly]

Amazing thank you so much. I've been looking for this explanation and steps for a while now. can you go a bit more into detail on the margin of safety , how does one choose a proper margin of safety.

[@Dividendology]

I’m glad you enjoyed the video! Understanding intrinsic value is a game changer for investing. As far as margin of safety is concerned, it’s essentially a way for investors to provide some margin for error in their calculations. At the end of the day, margin of safety is up to the individual investors risk tolerance. Aggressive investors may have a smaller margin of safety, and risk averse investors will likely have a larger margin of safety. I’ll likely make a video of margin of safety in the future.

[@reybigcena]

You are a legend. Probably the most useful video I have seen in the last 5 years.

[@Dividendology]

thank you!!

[@JS-rk4ot]

Very nicely explained. Thank you

[@thuy-tienle860]

Thank you for the instructional video. Very helpful. Is the growth rate coming from EPS, P/E or something else?

[@joseantoniocanorosas]

GREAT VIDEO! You earned a new subscriber, THANK YOU!! 👍

[@Nmode1990]

Great video !!! Thank you so much !! Wanted to ask if the “Y” is applicable in non us markets as well (I mean if I own a non us stock do I follow the same process to find the number you showed) and if the number “4,4” is always the same. Thanks again

[@Apeiron242]

I wish this video explained what these terms mean and why they're relevant. Do you have any back testing data on these models?

[@Dajen_Tk]

Great video, even as a beginner to investing I was able to follow along!

[@Dividendology]

Glad it was helpful!

[@paulollerhead941]

You sir, have lots of intrinsic value. This is perfect, thank you

[@Dividendology]

Wow, thank you!

[@tomstevelt9641]

How do you suggest dealing with negative EPS or negative Growth? For example, currently BA and DOW.

[@TheYellowshuttle]

Best step by step walk through of intrinsic value calculation I've seen so far! Thanks for sharing.❤️💎 Can the bond yields be replaced by other safety instruments - say FD etc?

[@Dividendology]

Thank you! As for your question, I would have to look closer into that to find out.

[@DisruptiveWealthCreation]

Great step by step tutorial.

[@lcmlcm2460]

Best explanation I’ve seen on KZbin so far. I probably will have to watch this a few times but I appreciate it.

[@Dividendology]

Thank you!

[@mikatu]

Thanks a lot. It was very well explained. I also find that the original formula is too agressive. I just think you shouldn't say buy vs sell, because the goal is not being selling stock simply because the market is not there. You should keep your stock if you believe in it. You should put buy vs not buy. To decide if you want to sell you should create a different model, where you incorporate your "pain-level".

[@Dividendology]

Great thoughts. I agree!

[@scorpiolj90]

I can thank you enough for this explanation. Thank so, so, so, so much!

[@Dividendology]

You're very welcome!

[@r.t.santor3840]

Very helpful thank you. Where does the revised formula come from though?

[@husseinalaaref4910]

In the IF statement, the first parameter should be (current price < acceptable buy price) not (acceptable buy price < intrinsic value). Thank you.

[@sanyasin56]

Hi! Just some questions out of curiosity. Why multiple average yield of bonds and divide current yield? I just want to know in what sense exactly this calculation is 'the' intrinsic value. By the way, Great lesson for beginner! Thank you! 😄

[@nagamo_5368]

I was thinking the same thing

[@nicholasmichael3823]

Thank you for the video! This helps me a lot! I have a question. If I am doing the calculations with a company that has a negative EPS, and I, therefore, get a negative intrinsic value, what should I do? This seems to throw off my results

[@leonuno7716]

yeah in the same situation

[@peircestillson584]

Great explanation!

[@andrewthacker114]

Interesting calculations, thanks for sharing

[@obijuan3004]

Great Job! Simple explanations, easy to understand. Now I just have to evaluate 4000 stocks…😊

[@vishwajeetpatel3872]

you can just automate this. as per the formula, you can acutally lookup the EPS and other numbers. Download the Script names you want to analyze, and create a dropdown of the scipts. so everytime you select the script, it will give the IV. should not take more than an hour to create this for all 4000 stocks.

[@zozany120]

@@vishwajeetpatel3872 how do i do this? is there a video explaining the proces?

[@receipt022]

When I enter that formular for fetching the EPS, google spreedshet gives me the EPS as per the last available quarter, in my case 30 June 2023, and not the TTM. In your video, however, it seems to import the TTM EPS. What am I missing?

[@elijahrombado334]

Thank you for making coding so much simpler.

[@Dividendology]

Glad it was helpful!

[@panzerknackerpaul2061]

Great work, thank You.

[@d.kleiser9514]

Thanks for the fine video. If 4.4% was used by B. Graham as the average AAA corporate bond rate, how old is that, and should it be updated and if so how? Thanks...

[@brandyharding7692]

I use 1.5 growth and have a table based on the average of the top 10 stocks in that industry divided by 2.

[@lakhbirtomar7963]

Thanks for such a truthful video

[@sanziocaroli4455]

Just my 2 cents, if growth rate is 17.93%, you have to put 0.1793 in the formula, not 17.93, in other words, if a number is expressed in percent, you have to divide percent.

[@javieralessandro8850]

Hi there, great video!!! do you use this fórmula? wich one pf those are more precise? Is there other form, that you use to calculate de IV pf a stock? thanks a lot!!!!

[@Dividendology]

Hi! Check out the stock analysis videos on my channel! I use 4 different methods of calculating intrinsic value there!

[@mayurshembekar9917]

Thank you so much for this video ❤️❤️

[@hgulled2]

BEST VIDEO EVER, THANK YOU.

[@ferydoonh5128]

Hello, Thanks for the very interesting topic. According to the ChatGPT the value should be calculated by this formula: Intrinsic Value= SQRT ( (22.5 * EPS over last 3 to 5 years)/ 10-Year Treasury Yield) What do you mean about it? Regards

[@nottheprincess7043]

Thank you so much for your information.

[@ravindertalwar553]

Congratulations 👏 and all the best for your success and happiness ❤️

[@pabloaguilar2528]

Great video thanks man we’ll explain

[@fabioquintana7148]

Great content! 👌

[@timothylowe3489]

Thank you for a great video. Being a complete newbie to this, does this work, if for example I am looking at a UK company and so put in a share price in GBP? Or do I need to convert this to dollars? Thanks

[@craig1131]

This is a “learning equation” so to say. The creator of this idea doesn’t actually use this equation, but rather he kind of uses it to show the kind of thought and reasoning that goes into the investments It’s also like 75+ years old, the world of finance has changed a lot since then, although it’s definitely still a nice idea to mess around with I wouldn’t make any serious investments using it

[@cherokeejack7757]

I should have learned this a long time ago, but I don’t recall call this in my 1969 Business management class. Good work!

[@FanaticalFinance]

Great tutorial, thanks for sharing!

[@Dividendology]

You’re welcome!

[@rickfanta4323]

Nice work. 1) Do you have a source for the revised model? 2) For high growth stocks like AAPL, it would be good to experiment with smaller growth rates (e.g. half? Some worst case historical rate) to see the impact of recessions

[@saulpizarro4684]

Apple is not high growth

[@noway2708]

@@saulpizarro4684 just answer the question

[@tomsmyth421]

Rick will lose his money because he thinks he’s buying a little ticker symbol and that he can forecast “growth rates”.

[@travelledfar]

For UK users, prefix the ticker with LON: and divide current price by 100 (p)

[@WorkingDadTrader]

Really great video and well explained. 👍

[@markjsheehan9952]

hey great video! Is there any websites/software you recommend out there that calculates the intrinsic value of a stock?

[@Dividendology]

Yep! TickerData.com has automated sheets for this!

[@anthonydelagarde3990]

Thank you, great tutorial,

[@saminda]

Valuable content

[@alexandrocalvin]

What a great content that you've been made📈 Oh btw I have a question, how did you define the Margin of Safety?

[@tylerbegasse1611]

Graham always said to have a Margin of Safety of at least 50%, but its completely up to you and your competence level.

[@No_BS_policy]

Margin of Safety= safety net for people's own delusion

[@Bullishbtc007]

Hi great video, just Quick question, why the growth rate (2g) in the formula not in the percentage ( 17.93%). Thanks

[@keith7411]

It's funny that the entire valuation is based on "expected growth rate over 5 years" which is forecast by a group of investors. My concern is that there is a massive reliance on other people's idea on the shares future value. Would have thought that this reliance defeats the entire point of the valuation. Can anyone confirm how this 5 year growth rate is calculated by the brains trust?

[@esechromechrom4647]

This changes completely the valuation. I think it should be in %.

[@davidvose2475]

You need to apply some discipline on the units of the parameters in the model. For example, g is a %. It's better to plug in 0.1793 in Excel and format as %. A reality check - is a stock really worth $388 when it generates $5.11 per year?

[@ashleyornellas1198]

So if I project yields going up on AAA bonds then I have to adjust accordingly

[@fullcircle4723]

Thanks for the info and research tools too.

[@Dividendology]

You bet!

[@4thFloorFitness]

I'm confused, in your Graham's formula you added in the P/E as a multiplier after you input the EPS, which isn't a part of the basic formula ?

[@trevorweir1278]

Is there an app that you recommend that will perform this function?

[@EgressFromStress]

Good evening. I have a question...is the 8.5 or 4.4, and the growth rate percentages? I noticed a lot of growth rates are in percentages. For instance one growth estimate was 101.42 % So do I have to change that to 1.0142? Also, your examples, are 8.5 percentages? If they are do I need to change them to .085 or .044? i am really excited about this formula but just am confirming...especially with the growth estimate of 101.42...does that need to be changed or not. Thanks so much.

[@sachseo.5530]

Had the same observation. Multiplier i think should be 0.1793 instead of 17.93?.

[@HarrisRyan-oy8eo]

Pls who is this coach that guides you? I’m in dire need of one

[@atulsoni70]

Excellent explanation!! Thanks

[@Dividendology]

Glad it was helpful!

[@jigaroza7973]

i think sir you are from india. pls sir gyuide me where to see indian curent yield aaa corporate bonds value .... kaha kon si website pe dekhe ki india ka current yield aaa corporate bonds ka value kya he bas sir itna guide kar do ... pls sir help me

[@mahmutates2423]

Thanks for sharing.

[@TheEihklusivKrossi]

Question: Y value is easy to track for US Markets. How do we find Y value for non-US markets? TIA

[@samyy974]

can you use the forward EPS instead because thats based on past quarters

[@Irishprice1]

Quick question for anyone with more grey matter upstairs than myself: ------------ They Buy/Sell formula seems to only look at acceptable buy price vs. intrinsic value. What if the current price is higher than acceptable buy price, but still lower than intrinsic value. Is there a way to use a formula (IFS for example) to list buy if: - Acceptable buy price is below intrinsic value AND - current price is belowe acceptable buy price ???

[@zamin_ali]

How often is the avg. yield AAA corporate bonds number updated? I was trying to find a current percentage and was able to find a current long term average yield of 6.51%. This is much different than the 4.4% listed in your video. What are your thoughts on this?

[@ryan_walker]

Feds raising rates . AAA bonds also go up to compete

[@adithyaajagadesh9823]

In your If statement I could see Acceptable value is less that intrinsic value in both the graham's case then how come the new model shows sell can you give me the formula

[@bawiliankhum]

Thanks for sharing

[@Dividendology]

My pleasure!

[@ChristianPierreW]

Excellent video! Thank you so much.

[@Dividendology]

Glad it was helpful!

[@iancahigu6303]

Just want to know, are people using the 7/8.5 from the formula as the PE? I’ve taken a different approach

[@RicardoSilvaMadeiraSkateOutros]

Thanks for your video! What if the formula contains one negative number, per example the growth rate expected for the stock. In that scenario you will have a negative intrisic value, which is impossible...what should we do?

[@Dividendology]

negative growth rates are not healthy for companies. I would advise you stay away.

[@jameskilburn3230]

Excellent video! Thank you

[@Dividendology]

Glad it helped!

[@abdulrahmanpasha8436]

Hi that’s was very helpful just one confusion I guess you have done a minor mistake in IF formula.

[@DH-ntered]

I have a Q - good vid btw and thanks for the tutorial if you copy the formula in D34 to I34 you should still get a "Buy" result? (the acceptable buy price is still < the revised intrinsic value eg (141.77

[@Dividendology]

Check the pinned comment above! Thanks!

[@enricog9540]

Hi there!, you said in your last video that the "PE no growth" is 7 and "G" is 1, can you confirm these variables for 2023? thank you!

[@Sandeesh_Srikantam]

Do we have any hint about when this intrinsic value price would be reached ?

[@thefantorangster2491]

Grahams gormula is fairly accurate, it’s just that 17% growth rate is a redicilous prediction.

[@user-yk8ir7si8j]

What if the EPS (TTM) or the Growth Rate is negative?

[@RepairApp]

This is really well explained. Have you created one where you compare an individual stock intrinsic value to just buying an 8% ETF rather than bonds. They weren't around in Graham's time, otherwise I'd think he'd use this higher earning option to compare.

[@isyaboybigz6098]

Thanks for the explanation so I'm guessing the second formula on the right is less aggressive and more conservative / safe entry ?

[@Dividendology]

That is correct.

[@heinrichvanrooi175]

The 1st model (original) I think would come in handy at the bottoms after huge bear markets and the 2nd one would be applicable at the end of a long bull. However that is easier said than done and require more analysis.

[@motinbar5]

Need to calculate the value of the company's assets and cash versus its value in current shares

[@byambaus1]

What & which spread sheet are you used on this video? By the way great explanation

[@Dividendology]

It’s a spreadsheet I’ve built myself, using grahams valuation. It’s available on my patreon at the link In the description.

[@user-lu6ud9se4t]

thanks. it's amazing

[@fredthered1074]

Brilliant video. Can I please ask, which of the two valuation models would you say is more accurate and the one to actually use when deciding to buy stocks? Because the difference in valuation for the two models is huge.

[@Dividendology]

I prefer the revised model, but if you watch my channel, you'll see there are other valuation models I tend to use as well.

[@fredthered1074]

@@Dividendology Thank you. I will check out your channel.

[@kurtlcas]

What if we use fcf per share instead of eps?

[@ozeromd1882]

Video is well explained. But you could have added that Graham did actually implement two warnings in a footnote that Growth Rates are unpredictable and therefore the formula is basically not very meaningful at all.

[@nott404]

Am I right in thinking that as the current yield is so high (5?) that most stocks are overpriced right now as of 17 th Aug '23?

[@TheSkg2011]

The video is great and I thank you for your hard work. However, the formula for to Buy/Sell condition is a bit confusing; an acceptable buy price should compare with the current price column I believe. I have watched this video several times. Let me know what you think.

[@NeuroCurieux]

I think you are correct, while copying the formulas on my own spreadsheet, based on the formulas the acceptable buy price should always be less than intrinsic value, hence always a buy What we want to know is: Is the CURRENT price an acceptable price to buy

[@gregcullen8744]

Are you sure at 10:50 in the video the Buy/Sell comparison is being done correctly? Should you be comparing the current price to the Acceptable Buy Price?

[@Dividendology]

see pinned comment

[@NoPickles.4Me]

(2x g(17%) growth) is a percentage shouldn't it be 2x .17 instead of 2x 17? Further, stocks trade at multiples so then you would need to apply a multiple to see the actual value now at 26 times earnings?